CM Dr YS Rajasekhar Reddy says that the market regulator should determine the price of the gas in a transparent and fair manner, reports Ashok Das.

Adding yet another twist to the ongoing saga over the pricing of the gas, Chief Minister Dr YS Rajasekhar Reddy on Wednesday said that the market regulator should determine the price of the gas in a transparent and fair manner.

“Our Government has launched all-out efforts towards this end. Since the gas production is likely to commence from June next year, the Government is making a strong case for market regulator to determine the price of the gas in a transparent and fair manner,” he said, a day after Anil Ambani had a 30-minute long meeting with him and reportedly discussed the need for reducing the price of gas supplied from Krishna Godavari(K-G) basin.

Dr Reddy said he would protect the interests of crores of gas consumers in the State as far as pricing of natural gas is concerned by convincing the Central government to ensure supply of gas from KG basin at a price determined by the State.

Dr Reddy wrote a letter in this regard to Prime Minister Dr Manmohan Singh, copies of which were sent to sent to Petroleum Minister, Deputy Chairman of the Planning Commission and Union Finance and Power Ministers.

He said the state was supplying free power to 25 lakh farmers and intend to continue the same till their economic conditions are stabilized. The government was pumping around Rs 4,000 crores as subsidy for power purchases. Hence, the price of natural gas from the KG basin was vital for power sector and is a matter of great concern to the government.

The Chief Minister said he would lead a delegation of State MPs cutting across political lines to represent the matter effectively to the Government of India. He also appealed to the political parties to fully support government in this regard in public interest.

Dr Reddy said that price bids of GVK, Konaseema and three other gas-based power companies should be rejected outrightly as they quoted higher prices that cannot be used to determine the price of gas since they do not even pay the cost of the gas and also are not legally valid as per the contractual agreement.

“It is ultimately the consumers and, in turn, the State government that will have to bear the brunt of the cost of gas. There can be no discovery of market price by calling for bids from companies which do not bear the cost of the gas,” he contended.

In another letter, the Chief Minister referred to the price of gas based on return on investments, cap on capital expenditure and pricing in Indian monetary terms. As per the Production Sharing Contract, the pricing of gas has to be discovered through a transparent system at "arm's length basis".

The upstream gas price should be determined by an Autonomous Regulatory Authority, as has been constituted for the power sector and not the Director-General/Hydro-carbons. The Government of India should also ensure that Gas Profit in kind is allocated to Andhra Pradesh power sector to make tariffs reasonable, he pointed out.

Dr Reddy demanded that an independent Autonomous Market Regulator for pricing of natural gas must be put in place. The Government of India should exercise options for allocation of profit gas in kind to power sector before June 30, 2007.